Salisbury Bancorp, Inc. Reports Results For First Quarter 2022

• First Quarter 2022 Net Income of $1.24 per Basic Common Share
• Common Equity Tier 1 and Total Capital Ratios of 12.8% and 14.0%, Respectively
• Non-performing Assets were 0.19% of Total Assets Compared with 0.27% at December 31, 2021
• Announced the Renewal of a Share Repurchase Program

LAKEVILLE, Conn., April 20, 2022 (GLOBE NEWSWIRE) — Salisbury Bancorp, Inc. (“Salisbury”), (NASDAQ Capital Market: “SAL”), the holding company for Salisbury Bank and Trust Company (the “Bank”), announced results for its first quarter ended March 31, 2022.

Net income available to common shareholders was $3.5 million, or $1.24 per basic common share, for Salisbury’s first quarter ended March 31, 2022 (first quarter 2022), compared with $4.1 million, or $1.45 per basic common share, for the fourth quarter ended December 31, 2021 (fourth quarter 2021), and $4.5 million, or $1.59 per basic common share, for the first quarter ended March 31, 2021 (first quarter 2021).

Salisbury’s President and Chief Executive Officer, Richard J. Cantele, Jr., stated, “We reported solid earnings, strong credit quality metrics and robust capital ratios for first quarter 2022 as we continue to invest in building out the foundation for prudent future growth. While our residential mortgage pipeline has begun to normalize back to pre-pandemic levels, our commercial pipeline is very strong. We are cautiously optimistic that the business environment will remain favorable despite the headwinds of high inflation, rising interest rates, and geo-political tensions. We remain focused on maintaining rigorous underwriting standards and driving profitable growth across our markets while continuing to provide outstanding customer service.”

Net Interest and Dividend Income

Tax equivalent net interest income of $10.5 million for the first quarter 2022 decreased $251 thousand, or 2.3%, versus fourth quarter 2021, and decreased $36 thousand, or 0.3%, versus first quarter 2021. Tax equivalent interest income of $11.3 million for first quarter 2022 decreased $248 thousand, or 2.1%, versus fourth quarter 2021 and increased $30 thousand, or 0.3%, from first quarter 2021.

The cost of interest-bearing liabilities of $812 thousand for first quarter 2022 was essentially unchanged from fourth quarter 2021 and increased $66 thousand, or 8.8%, from first quarter 2021.

Average earning assets of $1.4 billion for first quarter 2022 declined $8.9 million, or 0.6%, from fourth quarter 2021, and increased $154.6 million, or 12.3%, versus first quarter 2021. Average earning assets for first quarter 2022 included average PPP loan balances of $18.7 million, net of deferred fees. Average total interest bearing liabilities of $1.0 billion for first quarter 2022 increased $5.1 million, or 0.5%, from fourth quarter 2021 and increased $89.9 million, or 10.4%, versus first quarter 2021.

The tax equivalent net interest margin for first quarter 2022 was 2.95% compared with 2.99% for fourth quarter 2021 and 3.34% for first quarter 2021. Excluding PPP loans, the tax equivalent net interest margin for first quarter 2022 was 2.86% compared with 2.87% for fourth quarter 2021 and 3.16% for first quarter 2021. See SUPPLEMENTAL INFORMATION – Net Interest and Dividend Income on page 9 of this release for additional details.

Non-Interest Income

Non-interest income of $3.1 million for first quarter 2022 increased $247 thousand versus fourth quarter 2021 and increased $253 thousand versus first quarter 2021.

Trust and Wealth Advisory fees of $1.2 million for first quarter 2022 decreased $45 thousand from fourth quarter 2021 and increased $95 thousand versus first quarter 2021. The variances primarily reflected fluctuations in asset-based fees. Assets under administration were $1.0 billion at March 31, 2022 compared with $1.1 billion at December 31, 2021 and $902.1 million at March 31, 2021. Discretionary assets under administration of $625.3 million in first quarter 2022 compared with $657.8 million in fourth quarter 2021 and $578.2 million in first quarter 2021. The fluctuations in value primarily reflected changes in market valuations. Non-discretionary assets under administration of $423.9 million in first quarter 2022 declined slightly from $425.4 million in fourth quarter 2021 and increased from $323.9 million in first quarter 2021. The increase in non-discretionary assets from first quarter 2021 primarily reflected the addition of partnership assets under administration for the same client relationship. The trust and wealth business records only a nominal annual fee on this relationship.

Service charges and fees of $1.1 million for first quarter 2022 decreased $148 thousand versus fourth quarter 2021 and increased $188 thousand versus first quarter 2021. The decrease from fourth quarter 2021 primarily reflected lower interchange and lower loan prepayment fees. The increase from first quarter 2021 primarily reflected higher deposit fees. Income from mortgage sales and servicing increased $28 thousand versus fourth quarter 2021 and decreased $492 thousand versus first quarter 2021. The decrease from first quarter 2021 reflected a lower volume of sales of residential mortgage loans to the FHLB Boston.

Non-interest income for first quarter 2022 included a pre-tax gain on the sale of available-for-sale (“AFS”) securities of $210 thousand. Salisbury did not recognize any gains or losses on the sale of AFS securities in the comparative periods. Other non-interest income for first quarter 2022 included a pre-tax gain of $239 thousand on the sale of $3.8 million of commercial and residential loans.

Non-Interest Expense

Non-interest expense of $8.7 million for first quarter 2022 increased $182 thousand versus fourth quarter 2021 and increased $1.4 million versus first quarter 2021. Non-interest expense for first quarter 2022 included two isolated instances of debit card or check cashing fraud-related losses aggregating $251 thousand. Compensation expense of $4.8 million for first quarter 2022 decreased slightly from fourth quarter 2021 and increased $543 thousand versus first quarter 2021. The increase from first quarter 2021 primarily reflected higher salary, production and incentive accruals and significantly lower deferred loan origination expenses due to the processing of PPP loans in first quarter 2021.

Excluding compensation, other non-interest expenses for first quarter 2022 increased $212 thousand from fourth quarter 2021 and increased $851 thousand from first quarter 2021. The increase from fourth quarter 2021 primarily reflected the fraud losses noted above as well as higher professional fees and information processing expenses, partially offset by lower marketing expenses. The increase from first quarter 2021 primarily reflected the fraud related charges as well as higher facilities, information processing and marketing expenses.

The effective income tax rates for first quarter 2022, fourth quarter 2021 and first quarter 2021 were 18.6%, 19.1% and 21.6%, respectively. The lower tax rate in first quarter 2022 primarily reflected a higher mix of tax-exempt income from municipal bonds and tax advantaged loans on a comparatively lower level of pre-tax income.

Loans

Gross loans receivable of $1.1 billion were essentially unchanged from December 31, 2021, and increased $24.0 million, or 2.3%, from March 31, 2021. Excluding PPP loans, gross loans receivable increased $11.3 million, or 1.1%, from fourth quarter 2021 and $107.4 million, or 11.2%, from first quarter 2021. Approximately $5.5 million of residential loans were sold to FHLB Boston in first quarter 2022 compared with $4.2 million during fourth quarter 2021 and $21.3 million in first quarter 2021. The ratio of gross loans to deposits for first quarter 2022 was 83.6% compared with 80.8% for fourth quarter 2021 and 87.1% for first quarter 2021. Balances by loan type for the comparative periods were as follows:

Asset Quality

Asset quality continued to improve during the quarter. Non-performing assets decreased $1.4 million during the first quarter to $2.8 million, or 0.19% of total assets at March 31, 2022, from $4.2 million, or 0.27% of total assets at December 31, 2021, and decreased $2.9 million from $5.7 million, or 0.41% of total assets, at March 31, 2021.   

The amount of total impaired and potential problem loans decreased during the quarter to $27.3 million or 2.53% of gross loans receivable at March 31, 2022 compared to $32.8 million, or 3.04% of gross loans receivable at December 31, 2021 and $48.9 million, or 4.64% of gross loans receivable at March 31, 2021.

Accruing loans receivable 30-to-89 days past due increased $1.0 million during first quarter 2022 to $2.3 million, or 0.22% of gross loans receivable, from $1.3 million, or 0.12% of gross loans receivable at December 31, 2021, and decreased $0.1 million from $2.4 million, or 0.23% of gross loans receivable at March 31, 2021.

The allowance for loan losses for first quarter 2022 was $12.9 million compared with $13.0 million for fourth quarter 2021 and $13.9 million for first quarter 2021.The provision expense was $363 thousand for first quarter 2022 compared with a net reserve release of $202 thousand for fourth quarter 2021 and a provision expense of $158 thousand for the first quarter 2021. The provision expense for first quarter 2022 primarily offset net loan charge-offs (recoveries), which were $410 thousand for the first quarter 2022, $3 thousand for fourth quarter 2021 and $25 thousand for the first quarter 2021. Net charge-offs for first quarter 2022 included a write-down of $374 thousand to reduce the carrying value on $3.8 million of non-performing and under-performing residential and commercial loans, which Salisbury sold during the quarter, to the initial bid prices. The proceeds from the sale subsequently increased by approximately $239 thousand due to higher final bids. This increase was recorded as a pre-tax gain on sale in mortgage banking activities, net in Salisbury’s consolidated statement of income.

Reserve coverage, as measured by the ratio of the allowance for loan losses to gross loans, excluding PPP loans, was 1.21% for the first quarter 2022 versus 1.23% for the fourth quarter 2021 and 1.45% for the first quarter 2021. Similarly, reserve coverage, as measured by the ratio of the allowance for loan losses to non-performing loans was 467% for the first quarter 2022 versus 309% for fourth quarter 2021 and 243% for first quarter 2021.

Salisbury endeavors to work constructively to resolve its non-performing loan issues with customers. Substantially all non-performing loans are collateralized with real estate and the repayment of such loans is largely dependent on the return of such loans to performing status or the liquidation of the underlying real estate collateral.

Deposits and Borrowings

Deposits of $1.3 billion at March 31, 2022 decreased $45.7 million, or 3.4%, from December 31, 2021 and increased $79.3 million, or 6.6%, from March 31, 2021. At March 31, 2022, Salisbury did not have any outstanding brokered deposits compared with balances of $7.9 million at December 31, 2021 and $18.0 million at March 31, 2021. Average total deposits for the first quarter 2022 were $1.3 billion compared with $1.3 billion for the fourth quarter 2021 and $1.2 billion for the first quarter 2021.

Advances from FHLBB were $0.4 million at March 31, 2022 compared with $7.7 million and $11.4 million at December 31, 2021 and March 31, 2021, respectively. In first quarter 2022, Salisbury paid-off of a $6.0 million FHLB advance due in December 2022. Salisbury’s excess borrowing capacity at FHLBB was approximately $251 million at March 31, 2022.

Capital

Shareholders’ equity decreased $6.5 million in first quarter to $130.1 million at March 31, 2022 as unrealized losses in the available-for-sale securities (“AFS”) portfolio of $9.3 million and common stock dividends paid of $0.9 million were partially offset by net income of $3.6 million and other activity of $0.1 million. The unrealized losses in the AFS portfolio, which reflected the sharp increase in market interest rates during first quarter 2022, reduced both book value and tangible book value at March 31, 2022. Book value per common share of $45.12 at March 31, 2022 decreased $2.61 from fourth quarter 2021 and increased $0.40 from first quarter 2021. Tangible book value per common share of $40.20 at March 31, 2022 decreased $2.56 from fourth quarter 2021 and increased $0.55 from first quarter 2021.

The Bank’s regulatory capital ratios remain in compliance with regulatory “well capitalized” requirements. At March 31, 2022, the Bank’s Tier 1 leverage, total risk-based capital, and common equity tier 1 capital ratios were 9.66%, 13.98%, and 12.80%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 10.00%, and 6.5%, respectively. The unrealized losses in the AFS portfolio noted above do not affect the Bank’s regulatory capital ratios.

During first quarter 2022, Salisbury did not repurchase any of its outstanding common stock pursuant to its stock repurchase program established in March 2021. In March 2022, Salisbury’s Board of Directors approved the renewal of this program which authorizes Salisbury to repurchase Salisbury’s common stock in amounts up to an aggregate of five percent (5%) of the outstanding shares of Salisbury’s common stock from time to time over a period of twelve (12) months.

Dividend on Common Shares

On April 20, 2022, the Board of Directors of Salisbury approved a quarterly cash dividend of $0.32 per common share that will be paid on May 27, 2022 to shareholders of record as of May 13, 2022.

Background

Salisbury Bancorp, Inc. is the parent company of Salisbury Bank and Trust Company, a Connecticut chartered commercial bank serving the communities of northwestern Connecticut and proximate communities in New York and Massachusetts, since 1848, through full service branches in Canaan, Lakeville, Salisbury and Sharon, Connecticut; Great Barrington, South Egremont and Sheffield, Massachusetts; and Dover Plains, Fishkill, Millerton, Newburgh, New Paltz, Poughkeepsie, and Red Oaks Mill, New York. The Bank offers a broad spectrum of consumer and business banking products and services, as well as trust and wealth advisory services. For more information, please visit www.salisburybank.com. 

Forward-Looking Statements

This news release may contain statements relating to Salisbury’s and the Bank’s future results that are considered “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and expectations of management as well as the assumptions and estimates made by management using information currently available to management. Since these statements reflect the views of management concerning future events, these statements involve risks, uncertainties and assumptions, including among others: changes in market interest rates and general and regional economic conditions; changes in laws and regulations; changes in accounting principles; and the quality or composition of the loan and investment portfolios, technological changes and cybersecurity matters, and other factors that may be described in Salisbury’s quarterly reports on Form 10-Q and its annual report on Form 10-K, which are available at the Securities and Exchange Commission’s website (www.sec.gov) and to which reference is hereby made. Forward-looking statements made by Salisbury in this news release speak only as of the date they are made. Events or other facts that could cause Salisbury’s actual results to differ may arise from time to time and Salisbury cannot predict all such events and factors. Salisbury undertakes no obligation to publicly update any forward-looking statement unless as may be required by law.

Investor presentation slides, which include a review of financial results and trends through the period ended March 31, 2022, are available in the Shareholder Relations section of Salisbury’s website at salisburybank.com under About Us/Shareholder Relations/News & Market Information/Presentations.

Salisbury Contact: Richard J. Cantele, Jr., President and Chief Executive Officer
860-435-9801 or rcantele@salisburybank.com

Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS (unaudited)

Salisbury Bancorp, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME (unaudited)                                                                                                                                                                                        

Salisbury Bancorp, Inc. and Subsidiary

SELECTED CONSOLIDATED FINANCIAL DATA (unaudited)

⁽¹⁾ Adjusted to reflect the U.S. federal statutory benefit on income derived from tax-exempt securities and loans.
⁽²⁾ Refer to schedule labeled “Supplemental Information – Non-GAAP Financial Measures”.
⁽³⁾ Represents the capital ratios of the Bank.

Salisbury Bancorp, Inc. and Subsidiary
SUPPLEMENTAL INFORMATION – Non-GAAP Financial Measures (unaudited)

¹ Excluding revenue and expenses associated with trust & wealth advisory, the efficiency ratios would be: Q1 2022: 61.83%; Q4 2021: 60.62%; Q3 2021: 60.70%; Q2 2021: 61.59%; Q1 2021: 51.97%.

Salisbury Bancorp, Inc. and Subsidiary
SUPPLEMENTAL INFORMATION – Net Interest and Dividend Income (unaudited)

(a) Includes non-accrual loans.
(b) Includes interest-bearing deposits in other banks and federal funds sold.
(c) Average balances of securities are based on amortized cost.
(d) Includes tax exempt income benefit of $178,000, $192,000 and $170,000, respectively, for Q1 2022, Q4 2021 and Q1 2021 on tax-exempt securities and loans whose income and yields are calculated on a tax-equivalent basis. The income benefit reflected the U.S. federal statutory tax rate of 21.0% for 2022 and 2021.
(e) Net interest income divided by average interest-earning assets.
(f) Net of issuance costs.